2017complete3
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Loan Products<br />
Mortgages are described as either Adjustable Rate Mortgages (ARM) or<br />
fixed-rate. An ARM loan begins with a very low interest rate, but after an initial<br />
introductory period, it can fluctuate in either direction. Because of this volatility,<br />
mortgage professionals strongly caution against ARM loans unless you plan to<br />
either move or otherwise pay off the loan within a very short time period.<br />
The much more common fixed-rate mortgage offers a stable Interest rate over<br />
the length of the loan, and is therefore considered a much safer investment.<br />
Usually, buyers choose a 30-year mortgage. While a 15- or 20-year mortgage<br />
will allow for lower interest rates, as well as much less total interest over the<br />
life of the loan, the monthly payments will be substantially higher, and they<br />
are thus only recommended for small loans or loans that people are absolutely<br />
sure they will be able to afford.<br />
Even if you cannot afford a<br />
20% down payment, with<br />
good credit you may still<br />
qualify for a conventional<br />
loan. You will need to pay<br />
PMI, but these payments<br />
do not last the life of the<br />
loan, while FHA payments<br />
do. (For more info about<br />
PMI, see page 52)<br />
FHA loans<br />
For people who don’t meet the qualifications<br />
of conventional mortgages, the<br />
Federal Housing Administration, or FHA,<br />
insures loans that are easier to be approved<br />
for. FHA loans accept down payments<br />
as low as 3.5%. With lower credit<br />
score requirements, and higher debt-toincome<br />
allowances, these loans are much<br />
easier to qualify for, and have lower interest<br />
rates. However, they can be costly in<br />
other ways, as they require the purchase<br />
of two types of mortgage insurance from the FHA, which together add up to<br />
thousands of dollars in insurance payments.<br />
For some, who are sure they can afford the costs of home ownership but<br />
don’t qualify for a conventional loan, FHA loans can be a viable alternative.<br />
However, because of the very high insurance costs associated with these<br />
loans, they are generally only recommended for buyers with no other options.<br />
68 | 2017 Lakewood Home Buyer’s Guide
Change language